Will Advertising on OTT Devices Mature?

Advertising on OTT devices got a shot in the arm in June when Roku became the first set-top box provider to offer its data to advertisers. Such data, gleaned from Roku’s 15 million monthly users, will let advertisers better target specific customers.

Roku claims to have extensive insights into its audience and will let advertisers target specific segments at the household level. According to the Wall Street Journal, 21st Century Fox, AT&T’s WarnerMedia, and Viacom are on board to sell ad inventory in Roku’s “Audience Marketplace.” Viewers would see the ads while they watched programming on Roku.

In addition to providing more granular targeting, advertising on OTT devices also penetrates a growing area of distribution. But transacting and measuring OTT viewership has been a challenge. It’s also unclear whether OTT viewers will be amenable to this type of targeting in light of the recent Facebook/Cambridge Analytica scandal and the EU’s GDPR legislation.

What Advertisers Get

Despite competition from digital media, TV is still among the most effective forms of advertising. According to Broadcasting & Cable, Magna even increased its forecasts for TV advertising spend.

Historically, the downside for TV advertising has been its lack of targeting capacity. But with OTT, advertisers can link their data to other devices within a household. If someone in a household has been executing multiple searches for a new car, then that’s interesting information for car makers, particularly ones that are already in that consumer’s consideration set. Advertisers with e-commerce sites can also connect the dots between ad exposure and a purchase.

In addition to granular targeting, advertising on OTT devices lets marketers reach consumers who are already migrating to such platforms. eMarketer predicted that by 2021 some 78.6 percent of US households will use an OTT service. According to research cited in Adweek, OTT advertising spending is projected to hit $40 billion in 2020. That’s about half of all TV advertising.

For local stations, advertising on OTT devices offers a new way to increase revenues. Typically, broadcasters allocate two minutes an hour to TV distributors who then sell that time to local advertisers. If you are, say, a local car dealer, then using data to target households in the market would be worth a premium.

The Measurement Conundrum

Unfortunately, most advertisers don’t take advantage of OTT’s granular targeting. In part, that’s because there’s no standard for OTT advertising measurement. Nielsen and comScore both offer solutions, but Nielsen Digital Ad Ratings doesn’t standardize connected or smart TVs, and comScore’s solution doesn’t include all programmers.

Similarly, there are no connected TV equivalents of mobile and desktop identifiers like device ID or cookies to ensure that the ad messages reach the right member of the household.

As a result, the default measurement is Nielsen’s Gross Ratings Points (GRPs), the same measurement used for broadcast TV.

Data Provides Clarity—and Controversy

Roku’s Audience Marketplace offers some clarity for advertisers. Ideally, such data can highlight households that are in the market for a new car or fit a psychographic profile that makes them amenable to other pitches.

It’s an open question, though, as to how consumers will react to sharing such household-level data with advertisers. As we have already seen this year, Facebook’s Cambridge Analytica scandal has changed consumers’ attitudes about sharing such data. A Gallup poll executed in April found that 80 percent of Facebook users were very or somewhat concerned about their data being sold to other companies and organizations.

In Europe, meanwhile, the GDPR legislation puts limits on the data that marketers can use. Marketers need to disclose that they’re using such data and get consumers’ consent for it, or face steep fines.

There might be a win-win solution. Consumers can opt to share their data in exchange for a lower-priced version of an OTT device or in return for special offers. Some consumers might prefer such targeting if it means they’ll get more relevant offers. Of course, many viewers will prefer to opt out of such targeting. That’s not an optimum scenario, but it’s the best one that advertisers can hope for at this time.